Velocity Commercial Capital Securitization Ratings Affirmed and Upgraded by Kroll Bond Rating Agency

Rhea-AI Summary

Velocity Financial (NYSE: VEL) announced that Kroll Bond Rating Agency (KBRA) has reviewed 19 of its securitizations, resulting in 271 rating affirmations and three rating upgrades. These actions were part of KBRA's comprehensive review, reflecting stable collateral and structure performance and increased credit support. The upgrades were based on improved credit support and positive performance trends. Cumulative loss levels in Velocity’s securitizations are very low, ranging from 0.02% to 0.45%, with 14 out of 19 experiencing no losses. Velocity's strategy of retaining credit risk has contributed to the strong performance of its securitizations.

Positive

• KBRA affirmed ratings for 271 tranches.
• Three rating upgrades were achieved.
• Stable collateral and structure performance reported.
• Increased credit support noted for rated classes.
• Minimal cumulative loss levels from 0.02% to 0.45%.
• 14 out of 19 securitizations experienced zero losses.
• Positive performance trends in underlying pools since issuance.
• Strong alignment with investors by retaining credit risk.

Negative

• No significant negative business factors reported.

Insights

Financial Analyst

The affirmation and upgrade of Velocity Commercial Capital's securitization ratings by Kroll Bond Rating Agency (KBRA) are significant events from a financial perspective. The upgrades indicate that the underlying collateral and structural performance of these securitizations have improved, evidenced by increased credit support and minimal losses since issuance. This is a positive sign for both current and potential investors as it underscores the robustness and reliability of Velocity's securitization structures.

The cumulative loss levels ranging from 0.02% to 0.45% are exceptionally low, with the majority of these securitizations experiencing no losses. This highlights strong risk management practices and a solid pool of assets backing these securities. Investors can take this as a sign of a well-managed portfolio that poses minimal credit risk.

In the short-term, the reaffirmation and upgrades may lead to increased investor confidence and potentially improve market demand for Velocity's securities. In the long-term, consistently strong performance and low loss levels might result in lower borrowing costs and improved capital market access for Velocity, further strengthening its financial position.

Rating: 1

Market Research Analyst

From a market perspective, the rating upgrades by KBRA could enhance Velocity’s reputation as a reliable issuer of securitized products. This may attract new investors and improve the liquidity of its securities in the market. For retail investors, this development indicates stability and potential growth in investment value due to the lower risk associated with higher-rated securities.

Additionally, the emphasis on minimal losses and increased credit support aligns with investor interests in risk mitigation. Velocity's strategy of retaining credit risk in their securitizations aligns their interests with those of investors, making their securities more attractive.

It's important to understand that securitization ratings play a critical role in the perception of risk and potential returns. Higher ratings generally lead to lower yield requirements from investors, which can lower Velocity's cost of capital and enhance profitability.

Rating: 1

WESTLAKE VILLAGE, Calif.--(BUSINESS WIRE)-- Velocity Financial, Inc. (NYSE: VEL), (“Velocity” or the “Company”), a leader in business purpose loans, today announced that Kroll Bond Rating Agency (“KBRA”) has reviewed the ratings on 19 of the outstanding securitizations issued by its wholly-owned subsidiary, Velocity Commercial Capital, LLC (“VCC”) resulting in 271 rating affirmations and three rating upgrades of the underlying tranches. The rating actions occurred in conjunction with completing KBRA’s comprehensive surveillance review.

KBRA’s rating affirmations reflect continued stable collateral and structure performance, as evidenced by increased credit support for the rated classes and minimal losses since issuance. The rating upgrades considered each bond’s increased credit support relative to KBRA’s updated loss expectations and the generally positive performance trends exhibited by the related underlying pool since issuance. Cumulative loss levels in Velocity’s outstanding securitizations ranged from 0.02% to 0.45%, with 14 of 19 VCC outstanding securitizations experiencing no losses since issuance.

“KBRA’s rating actions reflect the continued strong performance of Velocity’s securitizations,” said Jeff Taylor, Executive Vice President of Capital Markets. “Velocity maintains a strong alignment with investors by retaining credit risk in our securitizations. This strategy has been key to the differentiated performance of our securitizations and drives our unwavering attention to producing high-quality loans and maintaining our best-in-class loss mitigation strategies.”

About Velocity Financial, Inc.

Based in Westlake Village, California, Velocity is a vertically integrated real estate finance company that primarily originates and manages investor loans secured by 1-4 unit residential rental and small commercial properties. Velocity originates loans nationwide across an extensive network of independent mortgage brokers it has built and refined over 20 years. For additional information, please visit the Company’s investor relations website at www.velfinance.com.

View source version on businesswire.com: https://www.businesswire.com/news/home/20240611574877/en/

Investors and Media:

Chris Oltmann

(818) 532-3708

Source: Velocity Financial, Inc.

FAQ

What did Kroll Bond Rating Agency do for Velocity Financial's securitizations?

Kroll Bond Rating Agency reviewed 19 of Velocity Financial's securitizations, leading to 271 rating affirmations and three rating upgrades.

What were the outcomes of KBRA's review of Velocity Financial’s securitizations?

KBRA affirmed ratings on 271 tranches and upgraded ratings on three tranches of Velocity Financial's securitizations.

How did Velocity Financial's securitizations perform in terms of losses?

Cumulative loss levels in Velocity Financial's securitizations ranged from 0.02% to 0.45%, with 14 out of 19 experiencing no losses since issuance.

What factors led to the rating upgrades by KBRA for Velocity Financial?

The rating upgrades were based on increased credit support relative to KBRA’s updated loss expectations and positive performance trends of the underlying pools.

How does Velocity Financial align with its investors?

Velocity Financial maintains strong alignment with its investors by retaining credit risk in their securitizations, contributing to differentiated and strong performance.